Food Companies Fear Bird Flu May Cause Egg Shortages

 The disease is forcing farmers to kill more than 38 million infected birds, and 33 million of those birds are laying hens. Photo Credit Peter DaSilva for The New York Times

With avian flu devastating a significant portion of the nation’s egg-laying hens, major food companies and restaurant chains are bracing for shortages and scouting the country to find alternative supply sources.

Roughly 87 percent of the birds stricken with the disease are laying hens, according to the Department of Agriculture, and many of the eggs they lay are turned into ingredients used by food businesses in things like scrambled egg patties and baked goods.

So while most food companies say they have enough eggs to meet their short-term needs, corporations like McDonald’s, Panera Bread, Unilever and General Mills are seeking other suppliers and substitute ingredients.

“One of our suppliers has been directly impacted by avian influenza despite their taking appropriate biosecurity precautions,” Lisa McComb, a spokeswoman for McDonald’s, wrote in an email. “We proactively developed contingent supply plans, and we do not anticipate an impact to our ability to supply eggs to our restaurants and serve our customers.”

 Avian flu has reduced the numbers of hens that lay eggs. Companies including McDonald’s, Panera Bread, Unilever and General Mills are seeking additional suppliers and substitute ingredients to prepare for potential egg shortages. Photo Credit Larry W. Smith/European Pressphoto Agency

McDonald’s, which introduced the Egg McMuffin in 1971, still reigns as king of the fast-food breakfast, with roughly one-fifth of the market, according to research by Sanford C. Bernstein & Company. Chains like Denny’s and IHOP, a unit of DineEquity, also have big breakfast businesses. “At present, we have not had any issues regarding the availability of eggs for our restaurants, but like the rest of the industry, we continue to monitor this situation closely,” Craig Hoffman, a spokesman for IHOP, said in a statement.

Cargill Kitchen Solutions, a unit of Cargill, the large food and agriculture company that supplies food service and restaurant businesses with egg products, is one of McDonald’s suppliers. “The A.I. cases have impacted the entire egg industry, including several Cargill Kitchen Solutions egg supplier locations,” the company said in an email, referring to avian influenza.

Post Holdings, which uses eggs in its products and sells processed eggs to others, recently said the flu crisis would slice about $20 million out of its cash flow — and that was before the Agriculture Department confirmed an outbreak among 1.7 million hens at another facility that supplies the company.

And on Thursday, Hampton Creek, a small business that makes plant-based egg substitutes, shipped tens of thousands of pounds of its Just Mix powdered egg substitute to General Mills, which uses egg products in things like its Betty Crocker Angel Food Cake Mix and a variety of refrigerated cookie doughs.

“Eight companies called today to see if we could do anything for them,” Josh Tetrick, chief executive at Hampton Creek, said last week in an interview at the company’s office in San Francisco. “Everyone is worried about a shortage of eggs.”

As of Wednesday evening, 13 companies worried about running short of eggs had contacted Hampton Creek about its egg substitutes.

Some people hoped that decisions by other countries to ban poultry products from the United States because of the flu might mean eggs previously due for export would offset shortages here. But exports account for only about 5 percent of the eggs produced in the United States, according to the United Egg Producers, a trade group.

As of Thursday, the flu is forcing farmers to kill more than 38 million infected birds, 33 million of which are laying hens. Last year, laying hens produced 7.3 billion dozen eggs, about a third of which were broken and turned into various liquid egg products, which include yolks, whites and only albumin.

For instance, Michael Foods, a division of Post that is one of the biggest egg product suppliers in the country, sells an “enzyme-modified whole egg product,” precooked egg white products and liquid eggs in a number of configurations, among other things.

Those eggs are used by grocery chains, restaurants, food service companies and food manufacturers in a wide variety of products, including mayonnaise, ice cream, cookies, muffins, batter for breading and French toast.

At Panera Bread, for example, eggs are used in some baked goods, as well as in its egg and egg white breakfast sandwiches and soufflés. “Eggs are a relatively small part of our menu, and at this moment our supplies are intact,” said Ronald M. Shaich, chief executive of Panera. “But we’re going through a series of reviews about how to ensure supply lines are there.”

Paul Ray, Panera’s vice president for sourcing, said there was is a lot of confusion about how extensive the impact on the egg supply would be and sometimes even about where eggs are used in the supply chain — suppliers themselves have suppliers, which in turn have other suppliers.

“Just accumulating information can be difficult — this continues to materialize,” Mr. Ray said. “Two weeks ago, it was an issue but not as significant an issue as it has become in the last 10 days.”

Many companies declined to speak about the indirect impact avian flu is having. Food businesses are notoriously secretive about their suppliers for competitive reasons, and some worry that reports of shortages will somehow raise concerns among consumers. Slightly more than half of consumers surveyed by the NPD Group, a consumer research firm, had concerns about avian flu and its implication for health and food safety — even though the Food and Drug Administration has repeatedly said it is unlikely that eggs in the marketplace would be contaminated in any way, and no chance for harm if eggs are cooked properly.

In a call with analysts on May 8, Robert V. Vitale, chief executive of Post, said the company had a shortfall of about 165 million pounds of liquid eggs.

Less than a week later, three more facilities that supply the company’s eggs — two with flocks that it owns outright and one with flocks owned by a supplier — had been hit with avian flu.

In total, the company has lost one-quarter of its egg supply, which means it cannot fulfill all of its contracts to supply egg products to other businesses. In some cases, Post will have to buy eggs on the spot market to meet its obligations — and Mr. Vitale said in the conference call that the only thing he knew about avian flu for certain was that prices on the spot market would go higher. The company said that Michael Foods, which Post bought last year for $2.45 billion, would discontinue some products and take “appropriate pricing actions to offset reduced egg supply and increased operating costs.”

Egg prices in general are moving up, according the United States Department of Agriculture’s weekly report, and there were not enough liquid eggs available for purchase in the spot market to cover demand last week.

Bon Appétit Management Company, a food-service business owned by the Compass Group that manages more than 500 cafes in universities, museums, corporations and other institutions, is also mulling its options. “We are already working with our chefs to change recipes to eliminate eggs,” said Fedele Bauccio, chief executive of Bon Appétit. “There are lots of things we can change on the menu — but that’s not going to solve the total problem.”

Mr. Bauccio sits on the board at Hampton Creek, which last week began accelerating its efforts to develop egg-free muffin, pancake and other mixes used in the food service business and by grocery store operators that have in-store bakeries, like Costco Wholesale. The original plan was to introduce such mixes next year, but Hampton Creek now hopes to have them early this summer.

The question is whether companies buying Hampton’s Just Mix egg substitute to offset tight supplies of eggs because of avian flu will stick to the change when the egg industry recovers. Just Mix is 48 percent cheaper than conventional eggs, according to Hampton Creek — and Mr. Tetrick is weighing promotions that would make it an even better bargain.

Correction: May 21, 2015
An earlier version of this article misstated part of the name of a food-service business owned by the Compass Group. It is Bon Appétit Management Company, not Bon Appétit Restaurant Company.
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